23. December 2014 · Comments Off on What Makes A Partnership Important? · Categories: Partnerships, Startups

When we talk about partnerships, more often than not what we are really taking about are distribution partners – channel partners extend the sales reach of your organization.  Getting channel partnerships right is particularly important for early stage companies who have fewer resources and less ability to absorb the cost and time associated with partnerships that don’t work out.

Know Your Product – Before entering into a channel partnership make sure you have an in-depth understanding of each component of your product and an inventory of all dependencies on outside parties – hardware, software, peripherals, connectivity, core services and complimentary services are common components when it comes to early stage tech companies. It is easy to overlook everyday external operational dependencies

Complexity – Once the inventory of external dependencies of your product is identified, each existing or potential partnership should be considered in terms of both market complexity and product complexity.  The higher the distribution partner ranks in both of these categories, the more time and resources your company will have to put into the partnership – be realistic and make sure you’re up for it as a company.

Set Realistic Expectations – If you are convinced you can manage the partnership, you need to understand what your company is going to get out of it, both in terms of revenue and the further development of your product’s core competency  Think of it as follows:

  • Low Revenue / Low Product  Development – Limited Partnership = Avoid
  • Low Revenue / High Product Development – Learning Partnership = Caution
  • High Revenue / Low Product Development – Earning Partnership = Pursue
  • High Revenue / High Product Development – Strategic Partnership = Aggressively Pursue

Obviously strategic partnerships should be your main focus – these are the ones that will keep the lights on and while also getting your closer to your end goal.

The Partner Perspective – So you have allocated your company’s resources accordingly and are on the verge of signing a deal with the strategic partner who will take you to the next big iteration of success?  Great – but before you get too excited, pause to analyse the partnership from the partner’s perspective too.  Is your product key to their go-to-market strategy?

If you find there is high value to both your company and the partner – then you have a strategic synergy and the best case scenario at hand.  If it is strategically important to the partner, but less so to your company, you may still have a good revenue opportunity and a partnership worth pursuing. Conversely, if the strategic importance is low for both companies, you likely have a mismatch in front of you and a partnership that you are likely better off without.

Where most early stage companies run into trouble is with partnerships that have a high alignment to their own company’s product strategy, but low value to your perspective partner’s strategy.  In this situation you are likely to get orphaned should the deal get signed.  An orphan partnership is a vacuum that must be avoided at all costs, but aspirations and human nature can cloud judgement and make it difficult to see the the potential for an orphan partnership before resources have been expended.  A knowledgeable advisory board and good mentors are great resources to consult for an objective take on the partners perspective.

Following the steps outlined above will allow you to prioritize partnerships and allocate resources appropriately.  It will set up your company up to implement a best practices in partner management – which will be discussed in the final blog entry of this partner program series.


 

This is part 2 on developing a winning partnership strategy for your company. You can read part 1 here.

06. August 2014 · Comments Off on So Much Sales Talent is Just Beneath the Surface · Categories: Partnerships, Uncategorized

If you lead a technology company, you likely know that the only thing harder to find than a good coder is a top tier account exec. There is a premium on qualified business development people that can take your company to the next level – and, surprisingly, you might be overlooking those could fit the description.

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About 85% of an iceberg’s mass lies underneath the surface of the ocean.  Likewise, the best sales talent your organization can find may come from applicants with unconventional backgrounds or even those already working for you in other functions.

Mark Murphy, author of Hiring for Attitudetracked over 20,000 new hires and found that 46% of them fail in first 19 months and 89% fail due to behavioral reasons or attitude  If you do that math, that means only one in twenty hires fails because of their hard skill set whereas two in five fail because of their soft skills.

Despite this and much more supporting data, applicants for sales or business development roles are generally filtered by linear, experience-centric questions such as: “have you carried a quota before” or. “what is the biggest deal you have closed”. What I find most ironic about this is that most startup founders or early stage execs, by applying this logic, likely would have declined their own application.

When it comes to identifying potential high performing business development talent, what you need to know can be assessed with four criteria:

  1. Emotional Intelligence: You will quickly get a feel for an applicant’s EQ when you are interviewing them, but look for a history of community engagement, public speaking and / or customer-facing experience on a CV. I personally got a lot out of early career experience interacting with customers on the front-line. In the long run, if an applicant does not like interacting with people, they will not succeed in a role where they have to put up with a lot of politics and personalities.
  2. Customer Orientation: The best sales professionals build enduring relationships and understand the customer both as an individual and in the context of the business. They genuinely approach the job as though they are a partner helping to solve a problem rather than an account executive trying to close a deal. Formal sales approaches like Solutions Based Selling have attempted to codify this skill set, but it really comes down to an ability to partner and deliver value over several quarters or years.
  3. Process Orientation: Sales – and especially B2B sales – are increasingly complex.  Processes on both sides of the deal need to be aligned and budget and deployment cycles considered.  Moreover, the nature of the sales cycle itself requires an account exec to be organized and meticulous.
  4. Product Expertise: This is where an internal candidate may be able to truly distinguish themselves and become a top performer relatively quickly. A top tier account executive must be an evangelist for your product. In technology, it can take some time to become familiar with the product(s), but you must have confidence that the candidate you;re hiring has the aptitude and smarts to learn your product’s use cases and specifications.

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If there is any doubt as to the importance of identifying the right talent, check out this cost of failure calculator put together by salestestonline.com

22. July 2014 · Comments Off on Six Key Terms When Partnering With the Empire · Categories: Early Stage Companies, Partnerships

If you run an early stage tech or Internet company, you might relate to Lando Calrissian. Lando was running his small cloud-based business when the Empire (insert your favorite $100B plus market cap player) showed up and made him an offer he couldn’t refuse. Reluctantly Lando agreed to their terms, but the deal just kept getting worse and worse.

Lando

Don’t give into your anger – after all, if you strike down negotiations, you will never sell more than you can possibly imagine!

Although you will not be able to dictate terms to a much larger prospective channel partner, being aware of six key items will limit your risk and enhance your upside:

1) Non-Compete vs. Non-Disclosure – As a preamble to entering into negotiations, you will be asked to sign a non-disclosure agreement (NDA). It is tempting to sign this quickly and proceed to doing a demo and negotiating a deal, but make sure you review the document for non-compete language. Non-compete terms can be overly restrictive and are generally not applicable to a channel partnership. Non-compete terms may not ultimately be enforceable, but save yourself potential headaches and only agree to non-disclosure.

2) Indemnities and Warranties – If your new partnership goes well, indemnities and warranties may never come into play, but; a contract is there every bit as much to protect against downside as it is to enable upside. When you enter into negotiations with a much larger prospective partner, they will almost certainly provide you with their standard boilerplate contract. Every time I have received such a contract, the indemnities and warranties were written largely to the benefit of the partner who did the drafting. You will have a high success rate if you inform the channel partner that you require indemnities and warranties to be mutual as it is generally difficult to justify doing otherwise.

3) Understand how long it will take to get paid – You would be surprised how many early stage partners I’ve heard express surprise (and dismay) at how long it takes to get payment from their channel partner. Assuming your deal is structured as a royalty split between the two parties, most enterprises will want to report royalties to you on a quarterly basis. Once reported, you may have to issue a purchase order to your channel partner and their standard payment terms could add another 30 to 90 days before you receive payment. Understand how this impacts your cash flow and make sure you can absorb delays.

4) Know the Channel Partner’s EULA – An end user license agreement (EULA) is the contract under which your channel partner will sell your product to their customers. Early in the negotiations, request a copy of the EULA as well as any referenced handbooks or documents. You will not likely be able to affect any changes to these documents during the course of negotiations, but it is critical that you can work with the terms and conditions contained within them. Pay particular attention to support obligations as most big tech companies will want to provide their customers with 24/7 support.

5) Term and Termination – Your early stage company will never be in a weaker position than when you negotiate the initial channel partner deal. The term of an agreement and termination clauses contained within it don’t necessarily dictate when the partnership will end, they also provide opportunities for business terms to be re-negotiated. Make best efforts to align the initial term of the agreement to a planned milestone in your product roadmap – if you have a significant upgrade or new product release timed around termination, you will be better positioned to negotiate new revenue opportunities (and maybe even a better royalty split).

6) R&D Tax Credits – Most governments offer tax credits for eligible R&D work done within their jurisdiction..These credits can be very meaningful for early stage tech or Internet companies and predicated upon conditions such as ownership of the intellectual property or having an exclusive license. If you are licensing technology to your channel partner, make sure you understand the impact that license will have on tax credit eligibility.

Of course, the best advice I can offer you is to engage legal counsel when negotiating any contract, but if you give consideration to the six items above, you will be off to a good start to getting a deal you can grow your company with.